Monday, July 11, 2016

The Larger Answer

A thoughtful question deserves a thoughtful answer, therefore, I will dissect the question from CH, from last post, and attempt a more contemplative response:

The CB's are buying equities. This is yet another example of central banks attempting to change global economics as we know it. But when the State starts buying up private companies you have to worry about the wider implications. We could just be seeing the tip of the iceberg today and assuming this becomes accepted as normal practice then could we envisage the eventual control of the private sector by the public sector? This is absolutism.
Not so much "control" as "cooperation". The dollar system today has evolved into a form of global fascism or corporatism. From a standpoint of "absolutism" ... well ... tribalism will not permit this absolutely.

When these governments and institutions run out of your money to buy stocks with----what so ever will happen when they are forced once again to monetize bonds? Hyperinflation is the only possible result with the only possible 'exit' strategy of creating and international currency being the SDR.
They will never run out of FIAT, and they monetize bonds, daily, continuously and exponentially, as failures to deliver shoot to the moon. Hyperinflation of the dollar is well underway, for years now, but dollar price hyperinflation has a real world deflationary component. 

One currency to rule them all? But without world war 3? i don't think so. It is hard to imagine a world of banker-kings eliminating the power of war--kings to use war to resolve the dispute about what is legal tender.
Wealth Giants for decades have seen gold as the way to move away from the dollar system without WWIII. Whether or not this is formalized through gold backing of SDR, gold is the solution, not a pure fiat SDR. What is "legal tender" globally versus "what we accept in trade" vs. "my contract demands payment in dollars" is a function of the depth of a currency, it's bonds and derivatives.

If it were that easy, why do people, nations, kings, and city states care for gold?
Too large an answer to present, but partially answered above ...

Conquest and possession of territory and bullion leave no uncertainties about counter-party risk, because the counter parties have been vanquished.

In a world of coordinated 'central bank' action, how can so much counterparty risk be managed in back door agreements without defectors from the cartel self dealing and eventually double timing the cartel?
A good question to ask Bundesbank. Or Lehman.

Whence the loyalty? By what ties can these loyalties be bound other than secret threats of violence? Because threats of violence and bribery can only keep those in positions of power in line for so long.
Self preservation. Tribalism. An understanding among the very wealthy that continued acceptance and support for the dollar system not only requires acceptance of the real tax it places on productivity (well covered by the profits it brings) but also the geopolitical will of the issuing country, its full spectrum dominance strategy, it's utter hegemony ... it's power and greed.
Again, there is no loyalty. There is Tribalism. There is self preservation, and the challenge of dominance, and balance.

As we go ever deeper into the rabbit hole, the only thing on earth we find that can equitably redistribute what remains of defaulting debt, is gold. It needs only to be priced high enough, in paper debt.


  1. From targeting "inflation" to targeting "everything"...and "everyone".

    I'm completely convinced by NotaRealMerican's take on society.

    Here's my latest article:

    Some newspapers asked me to rewrite it -- so my grandmother could understand it -- but I couldn't be bothered ;)

  2. Debt is the essence of FIAT. When debt defaults, FIAT defaults. To keep the FIAT system running, debt must be "socialized", as in bailouts, bail-ins, buybacks and "helicopter FIAT".

    The inflation they need is stalled by the stagnant wage effect of deflation - a real world supply and demand impact of the working classes.

    There is no deflation among the top 1%, only the bottom 90%. Remember, price hyperinflation is not a monetary event, it's a psychological event predicated upon panic - fear that "my money is becoming worthless".

    Worthless = "Sorry, we don't accept these sodbuster bank notes, do you have any greenbacks?"

    Amazing that the advanced economies have never known that type of event in more than a century. How does a central bank "go bankrupt?" When the rest of the world rejects their currency as payment for oil or gold is a good start.

    Then of course, when one major currency collapses, they all collapse, ergo GOLD to recapitalize the "new money".


  3. So my question is this... How will debt ever default if Central banks can simply print more paper to monetize that debt? Where does it end? Especially when military might steps in to guarantee acceptance and use of that fiat.


  4. It ends when the wealthy are impacted by the collapse of the working classes and the impact of that collapse upon their profits. In other words, it is gradually ending now, as it has ended in times past.

    Military might cannot step in and guarantee acceptance and use of FIAT. They can try, but it could mean WWIII. In other words, the Eurasian Economic Union members are continuing to sell dollar debt to the FED and its proxies so they can choke on it. The color revolutions (Ukraine, Syria, etc..) and other provocative measures in the Pacific have only accelerated this shift.

    Make no mistake, debt is defaulting, and the bailouts are becoming more selective. Deutsche Bank will be sacrificed, just as with Lehman.

    The world's timeline of change is not keyed to the little people's expectations and hopes and dreams. It is shaped by larger issues among the families.

  5. I'm predicting more and more violence.

    Humans cope by killing each other.

    1. Tribes have always warred over resources. When the current system breaks down to the point of resource scarcity (a long way off and avoidable, yet perhaps inevitable nonetheless) you will see violence on a qualitatively different scale than at present, I suspect.
      There is a real chance of a dirty nuke inside the US - a flag if you will, false or not.